Published in Globes on February 26, 2014
Fortissimo Capital has sold most of its stake in machine-to-machine (M2M) communications mobile modules developer Telit Communications plc (AIM:TCM), less than a year after investing in it. The sale comes after the company’s boosted its market cap 151% over the past 12 months to £200 million.
In a notice to the London Stock Exchange on Monday, Telit said that Fortissimo sold most of its stake in company: 10.5 million shares at £2 per share for £21 million ($35 million). Fortissimo, run by CEO Yuval Cohen, is Telit’s second largest shareholder, after the private equity fund invested in the company in the first half of 2013. It bought 14.6 million shares in the company at £0.75-0.80 for a total investment of $18 million, giving it a 14% stake. Telit’s largest shareholder is an investor group that includes CEO Oozi Cats and CFO Yosi Fait, with a 26% stake.
Fortissimo made a profit of $21 million on the sale. Following the sale, it owns 4,153,240 Telit shares, for a 3.8% stake in the company, worth £7.97 million ($14 million) at yesterday’s closing price of £1.92, and reflecting a paper profit of $9 million. In less than a year, it has made a gain of $30 million on its $18 million investment.
Fortissimo’s sales of most of Telit stake is no surprise, if a bit puzzling, as Telit is planning a listing on Nasdaq, which could boost its value, and therefore Fortissimo’s profit. Fortissimo apparently sold the shares now because as a minority shareholder in Telit, i.e. it is a financial shareholder, it has influence on the company’s management. Fortissimo is usually the controlling shareholder in its portfolio companies, and when it is a minority shareholder, it tends to sell shares when they are at a peak, or least when it sees fit to realize its profits.
Telit’s shareholders include Morgan Stanley (NYSE: MS) and BlackRock Inc. (NYSE: BLK), indicating that the US capital market has spotted the company’s potential. This is also a good starting position for a Nasdaq listing.
Telit posted $243.5 million revenue in 2013, 17.4% more than in 2012. Fourth quarter revenue rose 26.3% over the corresponding quarter to $72.5 million.